Western Air Lines Annual Report 1952

WESTERN AIR LINES
Board of Directors
Hugh W. Darling
Guthrie, Darling & Shattuck, Attorneys at Law
Los Angeles, California
Terrell C. Drinkwater
President, Western Air Lines, Inc.
Robert E. Driscoll
Chairman of the Board of Directors
First National Bank of the Black Hills
Rapid City, South Dakota
Hector C. Haight
Los Angeles, California
Marvin W. Landes
Vice President, Western Air Lines, Inc.
L. Welch Pogue
Pogue & Neal, Attorneys at Law
Washington, D. C.
Executive Staff
Terrell C. Drinkwater, President
Stanley R. Shatto, Vice President- Operations
Marvin W. Landes, Vice President- Service
Paul E. Sullivan, Vice President-
Administration and Secretary
Arthur F. Kelly, Vice President- Sales
J. Judson Taylor, Vice President and Treasurer
D. P. Renda, Attorney and Assistant Secretary
C. J. J. Cox, Controller and Assistant Treasurer
G. G. Brooder, Assistant to the President
Thomas M. Murphy, Assistant to the President
Joseph F. Ringland
President, .Northwestern National Bank of Minneapolis
Minneapolis, Minnesota
Stanley R. Shatto
Vice President, Western Air Lines, Inc.
Harry J. Volk
Vice President for Western Operations
The Prudential Insurance Company of America
Los Angeles, California
John M. Wallace
President, Walker Bank & Trust Company
Salt Lake City, Utah
Alexander Warden
Publisher, Great Falls Tribune-Leader
Great Falls, Montana
Sidney F. Woodbury
Chairman of the Board of Directors
Woodbury & Company, Portland, Oregon
General Offices
Western Air Lines Building, 6060 Avion Drive
Los Angeles International Airport
Los Angeles 45, California
Registrars
Citizens National Trust & Savings Bank
Los Angeles
Chase National Bank
New York
Stock Transfer Agents
Security-First National Bank of Los Angeles
Los Angeles
New York Trust Company
New York
General Counsel
Guthrie, Darling and Shattuck
Los Angeles
Auditors
Peat, Marwick, Mitchell & Co.
Los Angeles
TO THE STOCKHOLDERS OF
WESTERN AIR LINES, ITS CUSTOMERS AND PERSONNEL
Earnings
The .year 1952, twenty-seventh year of continuous
operation by Western Air Lines, was a period of
continued growth and development. The Company
established new records in passenger traffic and
operating revenue. Net income, after taxes and all
charges, was $1,232,114, as compared with earnings
of $1,389,300 in 1951 (which included substantial
non-recurring profits from the sale of fixed assets),
and $750,200 in 1950. Net income from all sources,
per share of capital stock outstanding amounted to
$1.72 for 1952, against $1.94 the preceding year,
and $1.05 in 1950.,:, Net income for 1951 included
$.52 per share derived from the sale of fixed assets.
Operating income for the year was a record
$2,835,318, as compared with $2,533,761 for 1951,
and $1,635,761 in 1950.
Dividends
During 1952 the Company increased its dividends
* Earnings per share for all years are computed on
the 715,213 shares of capital stock outstanding as
of December 31, 1952.
TREND OF
MAIL
NON-MAIL
1936 1948 1949
to 60 cents per share, which was paid in four
quarterly dividends of 15 cents each. This com-
pared with two semi-annual payments of 25 cents
each or a total of 50 cents per share for 1951. Prior
to that year the last dividend to stockholders had
been paid in 1936. At its first quarterly meeting
for 1953, 'the Board of Directors declared a dividend
of 15 cents per share payable March 16, 1953 to
shareholders of record March 2, 1953.
Finances
Continued improvement was made in the Com-
pany's financiaJ position during the year. At the
close of 1952, current assets (including $5,090,998
cash and government securities) totaled $7,643,517.
Current liabilities were $6,279,342, leaving net
working capital of $1,364,175. During the year,
property, plant, and equipment were increased
approximately $4,000,000. This included the receipt
of three new four-engine Douglas DC-6B aircraft
and related equipment. Two additional DC-6Bs
were delivered by Douglas Aircraft Company in
January of 1953, completing a $6,000,000 purchase
1950 1951 1952
18,595,063
15,000,000
10,000,000
5,000,000
2,000,000
500,000
10,000
by Western of the latest and finest airliners.
The Company's increase in net working capital
and funds for the purchase of new airplanes and
equipment were provided from three sources: earn-
ings retained in the business, increases in bank
loans, and the sale of additional capital stock. In the
spring of 1952, the Company sold 165,049 shares
of capital stock to the public with net proceeds of
$1,766,663. Bank indebtedness was increased dur-
ing the year by $1,833,837. As a result of earnings
retained in the business, after dividends paid to
stockholders, the net book value per share of stock
outstanding at the end of 1952 increased to $12.84
per share. This compares with net book value per
Simplified Balance Sheet
1952 1951
We own:
Cash and U.S. Government securities ... $ 5,090,998
Owed to us by others. . . . . . . . . . . . . . . . 1,434,403
Materials and supplies . . . . . . . . . . . . . . . 305,950
Buildings and improvements, net... . . . 2,172,103
Flight and other equipment, net. . . . . . . 7,530,367
Deposits on new equipment.... . . . . . . . 674,737
Prepaid expenses. . . . . . . . . . . . . . . . . . . . 812,166
Deferred charges less provision for
contingencies . . . . . . . . . . . . . . . . . . 342,990
We owe:
Notes payable ..................... .
Accounts payable .................. .
Inco1ne taxes ...................... .
Tickets sold but not yet used ......... .
Excess of what we own over what we owe,
18,363,714
4,618,837
2,587,077
1,462,701
513,564
9,182,179
or stockholders' equity . ................ $ 9,181,535
3,222,954
1,485,382
323,873
2,271,299
4,317,060
1,313,375
484,121
184,408
13,602,472
2,785,000
2,345,081
1,454,891
430,378
7,015,345
M87,127
share of $11.97 at the close of 1951.
In anticipation of future requirements for addi-
tional schedules and service, the Company recently
placed an order for three more DC-6B aircraft, to
be delivered in 1954. Funds for the additional
planes will be provided for through a credit agree-
ment with the Bank of America, which will be par-
ticipated in by a group of western banks on the
Company's system.
Revenues and Expenses
Operating revenues for the year totaled $18,595,063,
an increase of 14.2% over 1951, and a new record for
the Company. Passenger revenues were up 18.7%
over the previous year. Reflecting Western's non-
subsidy status, mail compensation at the same time
decreased 40.7%. Mail pay during 1952 represented
only 3.9% of total operating revenues, as compared
with 21.7% in 1949.
During 1952 passenger traffic was at the highest
level in ~Vestern's history, with a total of 774,079
passengers carried an average distance of 386 miles.
These passengers paid, exclusive of Federal trans-
portation tax, an average of $20.99 for their tickets,
equivalent on the average to 5.44 cents per mile.
By comparison, the average per mile ticket cost on
the Western Air Lines system in 1951 was 5.27
cents per mile.
Airline fares are one of the very few commodities
which are available to the public at a lower cost
today than prevailed four years ago. Moreover,
between 1940 and 1952, although the cost-of-living
index soared 89.2%, Western increased its average
passenger fares by only 14%.
Total operating expenses f9r the year amounted
to $15,759,745, an increase of 14.6% over 1951. The
increase in operating expense was attributable to
several factors - important among them being an
increase of 12% in the number of passengers carried
and an increase of 9.8% in total miles flown. But in
addition to the expanded scope of operations, the
cost of wages, materials, and nearly everything
required in the Company's activities reflected
increases during the year. Per revenue ton mile
flown operating expenses were 50.1 cents, as com-
pared with 49.9 cents per revenue ton mile flown in
1951.
The airline industry's ability to maintain fares
at approximately comparable levels during the past
decade has been due primarily to incr~ased volume
of traffic, increased efficiency, and the use of
increasingly modern equipment. But unless the
inflationary spiral of wages, materials, and services
is checked, it is likely that a point will be reached
when increased costs can no longer be absorbed by
increased voJume, and can be met only by an
increase in fares.
Personnel
No airline in the industry has a finer group of
skilled and experienced personnel than Western.
The successful operations of the Company in 1952
were due to the loyalty and hard work of these
people, who numbered 1649 at the close of the year.
They serve in five major divisions of the Company:
( 1) Operations, which includes flight, maintenance,
engineering and communications; ( 2) Service,
which includes stations, reservations, in-flight
service, cargo, and stewardesses; ( 3) Sales, which
includes traffic, advertising, and public relations;
( 4) Treasury, which includes accounting, purchas-
ing, stores, and budget control; and ( 5) Adminis-
tration, which includes corporate, legal, insurance,
personnel, and office management.
In 1952, to complet the employees' insuranc
program, a company-wide contributory retirement
plan was approved by the shareholders and placed
in effect. It was accepted by about ninety per
cent of the eligible employees. Participation in the
Company's group accident and sickness insurance,
group hospitalization insurance, and group life
insurance increased materially during the year. The
Company's liberal policy of emergency and vaca-
tion transportation on a space-available basis for
all personnel and their families was continued and
used extensively.
Westernaire Federal Credit Union - an
employees' organization - had a very successful
year. Total employees' savings on deposit at the
end of the year exceeded $384,000. A dividend of
five per cent was paid to all depositing members
by the Credit Union.
New Aircraft and Facilities
Five new DC-6B aircraft costing approximately
$6,000,000 are now being operated by Western be-
tween leading cities on the Pacific Coast, and on
Simplified Statement of Income
1952 1951
Income was derived from :
Passengers ......................... $16,250,201
Mail . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 719,266
Express, freight and baggage. . . . . . . . . . 661,987
Other income . . . . . . . . . . . . . . . . . . . . . . 1,927,190
Gain on disposal of property.. . . . . . . . . 26,154
Total Income . . . . . . . . . . . . . . . . . . . 19,584,798
The costs of doing business were :
Wages and salaries ....... . ....... . 7,436,275
Social security, group insurance and
retirement plan . . . . . . . . . . . . . . . . . 335,012
Gasoline and oil. . . . . . . . . . . . . . . . . . . . . 2,104,793
Materials, supplies and repair parts. . . . . 1,977,205
Depreciation and obsolescence . . . . . . . . 1,082,344
Advertising and publicity. . . . . . . . . . . . . 512,284
For servic to passengers. . . . . . . . . . . . . .588,809
Rentals and landing f es. . . . . . . . . . . . . 535,936
Insurance . . . . . . . . . . . . . . . . . . . . . . . . . 515,788
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . 108,539
Taxes other than income taxes. . . . . . . . . 533,278
Utilities and servic s. . . . . . . . . . . . . . . . . 573,732
Other costs. . . . . . . . . . . . . . . . . . . . . . . . . 548,689
Total Costs ..... . ............ . . - 16,852,684
Amount remaining before Federal Income taxes. . 2,732,114
Less Federal taxes on Income. . . . . . . . . . . . . . . . 1,500,000
Net Income . ............ . ..... . ...... . ... $ 1,232,114
13,687,903
1,211,975
506,715
1,367,140
480,435
17,254,168
6,389,012
250,210
1,772,690
1,343,147
l ,04,
'3,467
542,940
510,270
488,565
486,181
123,801
408,213
509,436
571,936
14:-,i39,868
2,814,300
1,425,000
1]89,300
its new, direct route between Minnesota and Cali-
fornia. These airplanes were ordered from the
manufacturer in the spring of 1951, with deliveries
beginning in late 1952. Western's DC-6Bs are the
most advanced version of the world-famous
Douglas airliners, and are equipped with every
modern development for safety, speed and comfort.
Their interiors feature typically Western fabrics,
More than 35% of Western's passengers during 1952
were women and children.
designs and colors. Initial reaction among travelers
to the inauguration of DC-6B service by the Com-
pany has been gratifying, and it is anticipated that
the present fleet, augmented by the three additional
DC-6Bs now on order, will be important factors in
Western's competitive position and in its service
to the public.
As part of the Company's continuing pro~ram of
improvement and modernization, engines used on
its fleet of Convair-liners are being converted to
the same type of power plant employed in the
DC-6Bs. This work is being done by Western in its
own maintenance shops. The conversim1 will pro-
vide uniform and interchangeable engines for both
types of aircraft, with resultant benefits in operating
and maintenance efficiency and economy.
To gear its service and sales facilities for the
steady increase in traffic being experienced, the
Company has added to its teletype communications
system on the new route, has centralized and
streamlined reservations control on a system-wide
basis, and has underway a program for improve-
ment of city ticket offices and airport passenger
handling facilities. The Company has just com-
pleted construction of a new hangar building at
the Seattle-Tacoma International Airport at a cost
of approximately $210,000 to meet DC-6B operat-
ing requirements.
The maintenance and headquarters facilities
completed in 1947 by Western at Los Angeles Inter-
national Airport at a cost of $2,500,000 have been
progressively modernized. The Company now has
one of the most complete and best-integrated main-
tenance and overhaul bases in the West, with suffi-
cient capacity to absorb continued expansion in the
Company's operations. During 1952, Western per-
formed in these shops a substantial amount of con-
tract maintenance work for other air carriers which
were engaged in international operations and in
the Korean airlift.
Mail Pay and Taxes
The Civil Aeronautics Act of 1938 as amended
provides that the compensation paid airlines for
carrying the United States mails should be at a
rate which will cover the cost of the service fur-
nished and in addition give the airline, under effi-
cient management, a reasonable rate of return on
the investment of its stockholders. The goal of the
scheduled trunk airlines for many years has been
to reach a point of self-sufficiency where the amount
paid for carrying the mail was not in excess of the
cost of the service rendered the Post Office Depart-
ment. That point has been reached by Western Air
Lines and since October 1, 1951, Western has re-
ceived but 53 per ton mile of mail carried. This
rate has been determined by the Civil Aeronautics
Board to contain no element of subsidy.
Having emerged, for the first time in its history,
from being a subsidized air carrier to Western' s
present position where no subsidy is received, it
is highly important that everything possible be
done to strengthen that position. In order to main-
tain Western's status as a permanently self-sufficient
carrier, far-sighted and intelligent government reg-
ulation of the industry by the Civil Aeronautics
Board is essential.
The Company and the industry must be per-
mitted to earn through their own endeavors suffi-
ciently liberal profits as will maintain stability and
establish the confidence of the investing public,
thus making airline securities attractive as a sound,
long-range investment. The ability of the airline
industry to maintain low fares in an inflationary
economy has been due in no small part to the
replacement of aircraft and other airline equipment
with modern and more efficient airplanes and facili-
ties. In order for this pattern of progress to continue,
large additional investments by the airline industry
will have to be made in the years ahead.
The question has been raised as to whether the
airlines are paying their fair share of the cost of
government airway facilities used jointly by the air-
lines, military, and various other airplane operators.
The facts are that the scheduled airlines pay more
than their fair pro-rata share for their use of such
facilities. Airline use, incidentally, is small com-
pared with the utilization of these facilities by non-
airline aircraft. For the calendar year 1952, Western
paid directly to the Federal government for fuel
and lubricant taxes the sum of $234,970. In addi-
tion to the Company's Federal income taxes for
that year in the amount of $1,500,000, the Com-
pany remitted to the Federal government for trans-
portation taxes on passengers and property the sum
of $2,068,659.
Air Coach Services
Western was the first scheduled, certificated air-
line to inaugurate air coach service on the Pacific
Coast. This phase of Western's operations, in bring-
ing the benefits of dependable, economical air
COACH
-e- DELUXE
transportation to as many travelers as possible, has
become increasingly important both to the Com-
pany and to the industry. Western now operates
economy-fare flights between all major cities on
the Pacific Coast, and between Los Angeles and
Las Vegas, Nevada. During 1952, air coach passen-
gers constituted more than 35% of the Company's
traffic, compared with 30% for 1951. These opera-
tions are conducted by the Company exclusively
in Douglas DC-4 Coachmasters. To be operated
efficiently and profitably at this stage of its deve\op-
ment, economy coach service must be offered only
between traffic centers of -
substantial population,
and the flights must be flown with aircraft contain-
ing higher-density seating than is normally used
for deluxe services. Within these limitations
Western anticipates continuing and substantial
increase in this type of service.
400,000
300,000
200,000
100,000
50,000
Route Structure
Since its creation in 1938, at which time it inherited
a patchwork system of "grandfather routes," the
Civil Aeronautics Board has developed a pattern
of domestic scheduled airlines comprising three
general types of carriers, with functional overlap-
ping in some instances.
First, the coast-to-coast trunk airlines, whose
major operation is the long-haul, transcontinental
business. These four larger carriers receive no
subsidy. In 1952, they, together with the. largest
regional trunk line in the East, did over 77% of
the total domestic trunkline passenger business,
the balance being divided in varying proportions
among the remaining ten certificated trunk airlines.
Second, the regional trunk airlines, which is
Western Air Lines' category. Most of these regional
carriers, including Western, receive no subsidy. The
function of the primary regional carriers, in the
regions they serve, is to transport passengers, prop-
erty, and mail - principally between major metro-
politan areas. Some of the regional trunk lines are
competitive on portions of their routes with rela-
WESTERN'S
EXPENSE
DOLLAR
I '
~
Taxes
11.1%
tively short segments of the coast-to-coast carriers.
Third, the local service, or "feeder" airlines,
which are engaged in the short-haul traffic to and
from small cities generally in groupings around
large metropolitan areas. Airlines in this third class
receive a substantial subsidy in order to permit
their useful but necessarily high-cost operation to
be conducted at a profit.
Looking ahead, there are many reasons to be-
lieve that the delineation between these three
classes of carriers will, in the future, become even
more marked than it has been in the past. An impor-
tant influence on this trend may be anticipated from
the new coast-to-coast, non-stop aircraft presently
being manufactured for the transcontinental air-
lines, which probably will be followed into service
by long-range jet transports.
Western is in the fortunate position of being
well-established as the regional trunk airline for the
West. There is no other major trunk airline exclu-
sively serving this western area. This is in marked
contrast with the situation existing in the eastern
portion of the country, where the number of
AIJ Other
Expenses
20.2%
Wages and Salaries
{l
111 [[I [IJI I IJ]
regional trunk lines is being reduced with approval
of the Civil Aeronautics Board through mergers.
Western has no plan or intention to merge with
any other carrier. The route structure of Western
Air Lines today consists of 5525 miles, serving 44
cities in 12 western states and the Province of
Alberta, Canada.
To meet the rapidly increasing demands for air
transportation in the western area it serves, Western
has filed applications for authority to operate direct
air routes between Denver, Colorado, and San
Francisco-Oakland, California, via Salt Lake City,
Utah, and between Denver and San Diego, Cali-
fornia, via Phoenix, Arizona. All of these cities, with
the exception of Phoenix, are now served by
Western on its existing routes. Favorable action on
these two petitions, which will soon be heard by
the Civil Aeronautics Board, will enable the Com-
pany to provide vitally needed additional regional
trunk line service in rapidly growing and impor-
tant areas. The 1,869 new route miles sought by
Western in these applications will, as shown on the
map in this report, aid in the sound integration of
Western' s existing regional system.
The Company also has on file with the Civil
Aeronautics Board an application to furnish serv-
ice on a direct route between San Francisco and
Las Vegas, Nevada, and an application to include
Sioux Falls, South Dakota, on its route connect-
ing Minneapolis-St. Paul, Rapid City, and Denver.
Other matters are pending before the Civil Aero-
nautics Board, of major importance, whereby
Western is seeking a more orderly pattern of its
routes by eliminating, where feasible to do so, un-
necessary and uneconomic service.
During 1952, by order of the Civil Aeronautics
Board, the cities of Yuma, Arizona, and El Centro,
California, were suspended from Western's certifi-
cates and given to a "feeder airline" to be operated
on a local service, subsidized basis.
On April 10, 1952 the Company's former sub-
sidiary, Inland Air Lines, Inc., was dissolved and
its routes and operations transferred to the parent
company.
At the close of 1952 Western was granted by the
Civil Aeronautics Board a very important new route
between Salt Lake City and Rapid City, South
Dakota, via Casper, Wyoming. This new route,
which closes a long-existing gap in Western's sys-
tem, not only permits the Company to provide
much-needed one-carrier service between these
Utah, Wyoming, and South Dakota cities with
Convair aircraft, but also makes possible entirely
new one-stop direct service with Douglas DC-6Bs
between Minneapolis-St. Paul and Southern Cali-
fornia, via Salt Lake City. The Company antici-
pates substantial and growing traffic over this route
linking key areas of the West.
Since 1946, Western has had a certificate of public
convenience and necessity issued by the Civil Aero-
nautics Board and approved by the President of the
United States, for a route between Los Angeles and
Mexico City. Service over this route has been and
still is delayed because of the absence of a bilateral
agreement between the Governments of the United
States and Mexico allowing reciprocal airline routes
between the two countries. During 1952 no progress
was made in this regard and its status and future
development at the present time is uncertain.
Western is continuing to urge that it be per-
mitted to serve the city of Calgary, located midway
between the cities of Lethbridge and Edmonton
in the Province of Alberta, Canada, which latter
two cities are presently served by the Company.
Although strong civic support is being extended in
behalf of Western Air Lines service for Calgary,
this is a matter that can be resolved only by our
own Government and that of Canada.
The West
The 12 western states and the Province of Alberta,
Canada, served by the Company comprise a sub-
stantial portion of the new economic frontier of
North America. The emergence of the West from
its traditional position as an economic colony of the
East strongly points toward increased demands for
four-directional air transportation in this region.
The amazing population growth during the last
decade of virtually every city served by Western,
the increasing decentralization of industry and of
government, and the rapid expansion of new west-
WESTERN Announces
NJ~\r Dlll/Jl'l1 ll()lJlE
1JU11~~~UN L()S Al\f (JJ~IJ~S
J\1\fl) l\iINNl~\P()JJS Sl:Pl\lJl
Now -for the first time -you can fly
between Southern California and the Twin Cities
without changing planes!
. . ~ . d the long-needed
: . . Western's new route prov1 es t l
. . skyway for business and pleasure rave
the great metropolitan centers
. between . 1
nd Los Angeles.
. . of Minneapolis-St. Pau a
3 flights daily
on Western's New
Direct Skyway
from the
Upper Midwest
to California
r--------------------------,
NOW/ P .
DC6B $E.f<V!CE.
ONE-srop
Between L
and Minne os Angeles
apolis/St. Paul
NON-STop
Fron, S I
to Minne a t L?ke City
apol,s/St p
and L au/
. os Angeles
NOW!
THROUGH SERVICE to California
Sy filling In the"Missing (.ink"
President Terrell C. Drinkwater with Western Air Lines
directors John M. Wallace, Salt Lake City; Robert E.
Driscoll, Rapid City; and Joseph F. Ringland, Minneapolis;
at civic event honoring Western's new route.
em industries and markets all carry with them the
need for additional airline service designed spe-
cifically for western travel. The western states are,
for the most part, not laced with concentrated net-
works of competitive surface carriers, and western
cities generally are farther apart than are eastern
cities. For these reasons among others, air travel
per capita in the West is considerably higher than
in the East.
Western Air Lines proposes to grow and develop
as a stable, unsubsidized public utility to meet these
new requirements. The Company holds no ambi-
tions to become a coast-to-coast airline. Western's
Board of Directors is now composed of outstanding
Western leaders from a number of the key cities
served. A very high percentage of Western's 6,500
stockholders live in the West. Western's stock offer-
ing in 1952 was, by agreement with the under-
writers, distributed almost entirely to the public
in the cities on Western's routes. All of Western's
financing and practically all of its purchasing is
done in the West. All of the key people in Western's
management are Westerners. Western's local per-
sonnel participate in civic activities in every city
on the system. With this background and planned
program for sound development, the outlook can
be nothing but optimistic for the future of America's
Oldest Airline.
It is with pleasure that announcement is made
of the election of Joseph F. Ringland, President of
the Northwestern National Bank of Minneapolis,
to the Board of Directors of the Company, and of
the election of J. Judson Taylor, formerly Treasurer,
to the office of Vice President and Treasurer.
Respectfully submitted.
March 2, 1953
Western Air Lines Building
Los Angeles International Airport
Los Angeles 45, California
President
Statement of Income
For the Year Ended December 31, 1952
(with comparative figures for 1951 l
Operating Revenue:
1952
Passenger ... . ............. . .......................... . $16,250,201
Express, freight, baggage and other ..................... . 661,987
Charter and other transport services ..................... . 8,766
Incidental revenue - net (Note 6) ................ . ...... . 954,843
17,875,797
Mail ........................................... .. .... . 719,266
18,595,063
Operating Expenses:
Flying operations ..................................... . 4,658,975
Ground operations .................................... . 2,478,858
Flight equipment maintenance - direct .................. . 1,739,368
Ground and indirect maintenance .............. . ........ . 960,103
Passenger service . . . . . . . . . . . . . . . . . . . . . . . ...... . ....... . 1,179,019
Traffic and sales ................................... . ... . 1,684,652
Advertising and publicity .............................. . 554,454
General and administrative ............................. . 1,485,680
Depreciation ......................................... . 1,018,636
15,759,745
Operating Income ................................ . 2,835,318
Non-Operating Income:
Gain on disposition of property . . .... . ..... . ............ . 26,154
Other ......................... . ..................... . 32,319
58,473
Non-Operating Charges:
Interest ................................ . ... . ......... . 108,539
Amortization of routes, contracts and leases ............... . 21,240
Other ..... . ......................................... . 31,898
161,677
Income before Federal Taxes on Income ............. . 2,732,114
Provision for Federal Taxes on Income (excess profits tax - none) 1,500,000
Net Income (Notes 6 and 7) ..... . ......... . ........ . $ 1,232,114
Statement of Surplus
For the Year Ended December 31, 1952
Amount as of December 31, 1951:
Of the Company ....... .. ............ . ......... . .... . . .
Of the dissolved subsidiary (Note 7) .. . . . ....... ... ...... .
Add: Net income for the year 1952 .. . ................... . .. .
Excess of cash proceeds over par value of 165,049 shares
of common stock issued during the year .......... . ... .
Earned
Surplus
$ 2,403,192
666,346
3,069,538
1,232,114
4,301,652
Deduct: Dividends paid in cash - $0.60 a share. . . . . . . . . . . . . . . 404,369
Expenses incurred in connection with issuance of
165,049 shares of common stock .......... . ........ .
Amount as of December 31, 1952 (Note 1) ... . ............. . .. $ 3,897,283
1951
13,687,903
506,715
131,368
743,553
15,069,539
1,211,975
16,281,514
4,016,622
2,330,450
1,345,389
817,576
1,036,101
1,384,410
586,227
1,232,699
998,279
13,747,753
2,533,761
480,435
21,237
501,672
123,801
18,828
78,504
221,133
2,814,300
1,425,000
1,389,300
Capital
Surplus
2,967,425
2,967,425
1,733,014
4,700,439
131,400
4,569,039
Balance Sheet
Assets
Current Assets: 1952
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,603,698
U.S. Government Securities at cost ...................... .
Receivables:
U.S. and State Government Departments ............ .
Traffic balances ................................... .
Other ( net of allowance for doubtful accounts $25,000) .
Inventory of parts and supplies at the lower
of cost or replacement market ............ ............ .
Prepaid expenses ...................................... .
Total Current Assets . .......................... .
Sundry securities .......................................... .
Properties and equipment at cost ( Note 1):
Flying equipment ..................................... .
Buildings on and improvements to leased property. , ..... .
Other property and equipment ......................... .
Less allowance for depreciation ..................... .
Deposits on equipment purchase contracts ( Note 2) ........... .
Routes, contracts and leases, less amortization $113,460 ........ .
Deferred charges:
Claim for recaptured mail pay ( Note 3) ................. .
Other ............................................... .
2,487,300
386,216
791,560
256,627
1,434,403
305,950
812,166
7,643,517
17,421
12,757,010
3,014,066
1,659,273
17,430,349
7,727,879
9,702,470
674,737
88,825
334,639
102,105
436,744
$18,563,714
1951
3,222,954
475,140
739,804
270,438
1,485,382
323,873
484,121
5,516,330
16,962
8,831,906
2,989,534
1,626,032
13,447,472
6,859,113
6,588,359
1,313,375
96,459
126,000
144,987
270,987
13,802,472
As of December 31, 19, 2
(with comparative figures for 19511
Current Liabilities:
Current portion of long term notes ...................... .
Accounts payable ..................................... .
Accounts payable - taxes collected from others ........... .
Accrued salaries, wages, taxes, insurance and other ........ .
Air travel plan deposits ................................ .
Unused transportation ................................. .
Federal taxes on income - estimated .................... .
Total Current Liabilities . ........................... .
Notes payable - secured (net of current portion ~ncluded
in Current Liabilities) (Note 1) ......................... .
Provision for contingencies (Note 3) ......................... .
Shareholders' equity:
Common stock - $1.00 par value per share
Authorized 2,000,000 shares ( Note 4)
Issued 715,213 and 550,164 shares respectively ....... .
Capital surplus ....................................... .
Earned surplus from December 31, 1934 ( Note 1) ......... .
Commitments and contingent liabilities ( Note 2)
Retirement plan ( N ot_
e 5 )
1952
$ 1,716,000
1,044,627
266,953
1,045,569
229,925
513,567
1,462,701
6,279,342
2,902,837
200,000
715,213
4,569,039
3,897,283
9,181,535
$18,563,714
1951
861,000
887,417
246,095
1,001,619
209,950
430,373
1,454,891
5,091,345
1,924,000
200,000
550,164
2,967,425
3,069,538
6,587,127
13,802,472
_,...,n.,'l'l'~~
~
Notes to Financial Statements
Note 1. Notes Payable-Secured. The long term notes payable of $4,618,837
together with the loans obtained in January 1953 of $1,800,000 are repayable
in monthly amounts aggregating $1,305,000 annually. Additional principal
is to be repaid on or before each April 1 in amount equal to 331/3 % of net
income of the preceding calendar year. The indebtedness is secured principally
by aircraft, engines, propellers and the Los Angeles hangar and office building
representing a total cost of approximately $15,300,000 including $2,100,000
for two Douglas DC-6B aircraft delivered in January 1953.
The related bank credit agreement includes, among other things, conditions
and requirements which effectively limit the amount of earned surplus dis-
tributable as dividends. The greatest amount of earned surplus is restricted
by the requirement that the excess of current assets over current liabilities
(exclusive of the current portion of the long term debt) shall not be less than
$1,000,000 or a greater amount determined by projecting average monthly
expense (exclusive of depreciation) which greater amount as of December 31,
1952 approximated $1,300,000. Accordingly, earned surplus as of December
31, 1952 was restricted in the amount of $2,117,108 leaving $1,780,175
not so restricted.
In December 1952 arrangements were made to amend the credit agreement
to provide for an additional borrowing in 1954 of $2,700,000 to be used for
the acquisition of three Douglas DC-6B aircraft referred to in Note 2. The
maximum indebtedness will continue to be limited to $6,500,000 with the
commitment fee on the unused portion remaining at of 1 % per annum;
interest on the total indebtedness is to be increased, effective in 1953, from
3% to 3% per annum.
Note 2. Commitments and Contingent Liabilities. In December 1952
the Company contracted for three additional Douglas DC-6B aircraft with
delivery scheduled to commence in August 1954. These three aircraft together
with the two like aircraft acquired in January 1953 represented a total
commitment at December 31, 1952 of approximately $5,600,000 as to which
advance payments of $674,737 were made; additional advance payments on
the aircraft ordered in December 1952 are to be made in 1953 on or before
May 1 in amount of $696,000.
Though provision has been made for all known income tax liabilities the
Federal income tax returns for the years 1950 through 1952 are subject to
examination by the U. S. Treasury Department.
As of December 31, 1952 the Company was contingently liable for claims
and law suits in which it is or may be a defendant but management and its
counsel believe the ultimate liability, if any, will not materially affect the
financial statements.
Note 3. Claim for Recaptured Mail Pay. The Post Office Department in
1951 and 1952 recaptured $334,639 of mail revenue related to the period
prior to January 1, 1949. This action was taken in view of an Opinion and
Order issued by the Civil Aeronautics Board under date of October 12, 1951.
Management is of the opinion that the position of the Civil Aeronautics Board
as taken in such order is legally wrong and should not be sustained in an
appeal for review now pending before the United States Circuit Court of
Appeals. The Post Office Department has also filed an appeal from the Board's
order in which they assert that the Company should be required to refund
an additional $447,000. Pending the final outcome of this matter the Company
has established a provision for contingencies of $200,000 measured by the
amount recaptured ( as set forth under Deferred Charges) net of a related
Federal tax credit.
Note 4. Options to Purchase Capital Stock. 35,000 shares were reserved
as of December 31, 1952 under a Restricted Stock Option Plan. 31,000
shares have been allocated, as of March 2, 1953, to twelve officers and
key employees; options have been issued for 27,750 of the allocated shares
with option prices ranging from $10.28 to $14.14 a share. The term of each
option granted shall be five years from the date granted and the right to
grant options under this plan shall terminate April 9, 1956.
Note 5. Retirement Plan. A contributory retirement plan for all eligible
employees including officers, implemented by a group annuity insurance
contract, was placed into effect on July 1, 1952. The plan, which is cancellable
by the Company, was submitted to and approved by the stockholders on
April 8, 1952. The cost of the plan as charged to operating expenses in 1952
totaled $153,632 for both current and past service costs. Management con-
templates that the unrecorded cost for past service benefits of approximately
$1,060,000 will be funded over an 11 year period requiring annual payments
of $106,000, the first of which was made in December 1952.
Note 6. Revenue Subject to Renegotiation. Under applicable Federal
statutes incidental revenues of the Company in gross amount of approximately
$1,050,000 for 1951 and $1,600,000 for 1952 are subject to renegotiation.
In the opinion of management the ultimate refund, if any, will not have a
materially adverse effect on the financial statements of the Company.
Note 7. Dissolution of Subsidiary Company. Effective April 10, 1952,
the Company's 99% owned subsidiary, Inland Air Lines, Inc. (previously
consolidated from June 1, 1944, date of acquisition, through December 31,
1951) was dissolved and its assets, liabilities and operations were transferred
to the Company with a cash provision being made for the outstanding minority
shares. Accordingly, the Statement of Income for 1952 includes Operating
Revenue and Net Income of the dissolved subsidiary for the period January 1
through April 9, 1952 in the respective amounts of $812,441 and $7,022;
also, the Statement of Earned Surplus includes the prior earnings which were
applicable to the Company's investment in the subsidiary. ~ ...
Revenues:* 1944 1945 1946 1947 1948 1949 1950 1951 1952
Passenger ......... , ............. $ 3,169 5,654 10,474 10,114 7,813 . 8,471 11,395 13,688 16,250
Mail ............................ . 837 1,239 1,326 1,570 1,740 2,504 2,090 1,212 719
Express, Freight and Excess Baggage 155 206 318 410 483 313 497 507 662
Other ........................... 130 132 118 282 31 246 264 875 964
- - - -
Total Revenues ................. $ 4,291 7,231 12,236 12,376 10,067 11,534 14,246 16,282 18,595
Operating Expenses: *
Depreciation ..................... $ 321 555 1,369 1,845 1,164 1,335 1,124 998 1,019
Other ........................... 3,677 6,297 11,744 11,196 9,198 9,229 11,486 12,750 14,741
Total Operating Expenses ......... $ 3,998 6,852 13,113 13,041 10,362 10,564 12,610 13,748 15,760
Operating Profit (Loss)* .............. $ 293 379 (877) (665) (295) 970 1,636 2,534 2,835
Other Income or ( Charges) * .......... ~ (20) ( 192) (186) (258) (196) 280 ( 103)
$ 299 359 (877) (857) (481) 712 1,440 2,814 2,732
Provision for Federal Taxes on Income* $ 147 169 (277) 88 ( 333 ). 391 690 1,425 1,500
- - - -
Net Income (Loss)* ............... $ 152 190 (600) (945) (148) 321 750 1,389 1,232
- - - - - -
Operating Statistics
Route Miles ........................ 2,962 3,117 4,808 4,725 4,727 4,727 5,016 5,016 5,016
Available Ton Miles':' ................ n/a n/a 35,831 35,757 29,534 32,034 44,515 43,036 48,557
Revenue Ton Miles* ................. n/a n/a 22,877 20,887 14,660 16,383 24,697 27,549 31,434
Passengers and Tonnage Carried
Revenue Passengers ................ 147,854 303,931 602,302 491,680 353,569 422,193 619,624 691,322 774,079
Mail Tons ........................ 2,267 3,347 1,852 1,722 1,543 1,359 2,150 3,419 3,243
Express and Freight Tons ........... 472 754 1,640 2,252 2,702 2,435 3,396 3,191 3,729
Revenue Miles Flown*
Airplane Miles . . . . . . . . ............ 4,057 7,279 10,594 9,607 8,707 9,496 11,783 11,487 12,631
Passenger Seat Miles ............... 73,101 138,852 301,856 312,615 243,771 299,503 414,169 401,720 453,332
Passenger Miles ................... 63,073 117,106 214,023 194,923 135,724 155,747 233,118 259,693 298,9,'.31
Mail Ton Miles ................... 905 1,120 706 733 574 567 978 1,449 1,358
Express and Freight Ton Miles ...... 222 307 635 912 1,089 926 1,442 1,282 1,524
Other Statistics:
Passenger Load Factor (%) ......... 86.3 84.3 70.9 62.4 55.7 52.0 56.3 64.7 66.0
Average Length in Miles per
Passenger Trip .................. 427 385 355 396 384 369 376 376 386
Average Revenue per Passenger Mile $ .0502 .0483 .0489 .0519 .0576 .0544 .0489 .0527 .0544
Number of Employees End of Year ... 1,120 1,674 2,396 1,529 1,285 1,226 1,279 1,459 1,649
* 000 omitted n/a not available
... from Los Angeles
and San Francisco to
Seattle-Tacoma and Portland!
~
Western's DC-6B is the most advanced version of the
~ world-famous Douglas airliners- newer, bluer, faster!
CITY
GAS
#
PRINGS
~ # #
-()PHOENIX
~
~\')
~~<,'-, ~,;:.<::,
.~r::.\r::,_<:i .ff MINNEAPOLIS
~" 'Ii -----,ST.PAUL
ROCHESTER
WESTERN AIR LINES .,
Present and Proposed Routes